This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Commercial mortgages can be a great way to finance the purchase of a commercial property, whether for investment or to run your own business. However, if you have bad credit, it can be challenging to secure a commercial mortgage.
A poor credit history can make it difficult to get approved for a loan, or can increase the interest rates that are available to you.
Nevertheless, there are some lenders who may offer you a commercial mortgage with bad credit. This guide will provide information on how to get a commercial mortgage with bad credit, the type of bad credit problems lenders will accept, how long the mortgage will be, and what to do about refinancing a commercial mortgage with bad credit.
If you have bad credit, there are several factors that can affect your ability to obtain a commercial mortgage.
These factors include your current financial situation, the severity of your bad credit, when the bad credit was registered and the lender you approach.
Current financial situation
Before applying for a commercial mortgage, you need to assess your current financial situation. This includes your credit history, income, and expenditure.
A lender will look at your financial situation to determine if you are a suitable candidate for a commercial mortgage. If your current financial situation is stable, it can improve your chances of getting a commercial mortgage, even with bad credit.
Severity of bad credit
The severity of your bad credit is another important factor to consider. Lenders will typically look at your credit history to assess the level of risk involved in lending to you. A poor credit history may make it more difficult to secure a mortgage, but it does not necessarily mean that you will be rejected. Lenders may be more willing to lend to you if you can demonstrate that you have taken steps to improve your credit score.
The dates of your bad credit
The dates of your bad credit are also important to consider. Lenders will typically look at the last six years of your credit history, so any negative marks on your credit report that are older than this may not be taken into account. However, more recent adverse credit may impact your ability to secure a mortgage.
What lender you approach
The lender that you approach is also an important factor to consider. Some lenders specialise in providing mortgages to individuals or businesses with bad credit, while others may be more selective.
It is important to research different lenders and their lending criteria to find the best fit for your financial situation. A specialist broker is in a great position to help you with this, as they will already know where to look.
While adverse credit can make it more difficult to secure a commercial mortgage, there are some types of credit problems that lenders may be willing to accept. Here are some of the most common types of bad credit problems that lenders may consider:
Missed payments and defaults
Missed payments are recorded on your credit profile when you fail to make a payment on time to an organisation that has loaned you money. This can include payments on credit cards, loans, or other financial obligations.
When multiple payments are missed consecutively, this can result in a default, or even CCJ (County Court Judgement). Lenders may be willing to overlook a few missed payments, especially if they occurred several years ago and you have since made a strong effort to improve your financial situation.
Individual Voluntary Agreements
An individual voluntary agreement (IVA) is a formal agreement between you and your creditors to repay your debts over a set period of time. This could be a good option if you are struggling with debt and want to avoid bankruptcy.
Lenders may be more willing to lend to you if you have successfully completed an IVA and have since built up a strong financial profile.
Bankruptcy is a form of insolvency where your assets are sold to pay off your debts. Bankruptcy can have a serious impact on your credit score and can make it difficult to obtain credit in the future.
However, some lenders may be willing to work with borrowers who have been made bankrupt in the past, but the bankruptcy has since been discharged. You may need to wait for the passing of an interim period of time before your application will be considered.
If you have rebuilt your credit profile, you may be able to find a lender who is willing to work with you. A broker can help you investigate your options, reducing the work you have to do.
Refinancing a commercial mortgage with bad credit can be challenging, but it may not be impossible. The first step is to understand your current financial situation and why you have bad credit.
Once you have identified the reasons for your bad credit, you can work on improving your credit score. This can include paying off outstanding debts, keeping up with current payments, and checking your credit report for any errors.
When it comes to refinancing a commercial mortgage, it is important to work with a specialist lender who has experience working with borrowers who have bad credit. These lenders understand the challenges that come with adverse credit and may be able to offer solutions that traditional lenders cannot.
Working with a specialist commercial mortgage broker will make is easy to establish if there are bad credit commercial mortgage options available to you. They can also help you prepare your application and ensure that you have all the necessary documentation.
It is important to note that refinancing a commercial mortgage with bad credit may come with higher interest rates and fees. This is because borrowers with bad credit pose a higher risk of not repaying to lenders.
Once you are able to improve your credit score and demonstrate that you are a reliable borrower, you may be able to refinance your mortgage at a more favourable rate in the future.
If you are a landlord with bad credit looking to secure a commercial mortgage, it is useful to seek advice from a specialist mortgage broker. At Commercial Trust, we have years of experience working with landlords in similar situations and have built strong relationships with lenders who offer bad credit commercial mortgages.
Our team of experts will work with you to understand your financial situation and advise you on the best options available to you. We will also identify lenders who are best place to help you if you have challenges with your credit profile.
With our help, you can take the necessary steps to secure the financing you need to achieve your business goals. Choose us as your mortgage broker and let us guide you through the process of securing a bad credit commercial mortgage with confidence.
Need a hand with a commercial mortgage? Speak to one of our expert brokers.